Capitalism at Bay: A Letter to the Economist

27102008

Dear Sir/Madame:

Your summary of the worldwide debate on the financial crisis and your making explicit that capitalism is on trial, brings the usual Economist succinctness and wit (Leader Article of October 18, 2008). But you miss the underlying issue here through your broadbrush, unreflected concepts of what a capitalist economy is. You speak as if there is only one variety of capitalism: that it must be free-market globalism; that government is bad, private sector is good; that global capital mobility is a God-given commandment. These concepts completely miss important, albeit subtle distinctions. You thus keep concealed a genuine solution to our current malaise.

The key issue in this crisis is that unfettered free enterprise leads to concentration of power, whether by a single individual, a single enterprise, and/or a single industry over all other industries. That literally a couple hundred firms, mostly in New York City and London, abetted by policy makers in those two countries’ capitals – most of whom formerly worked at said firms – should send the entire world into an economic tailspin, is once again evidence of capitalism’s necessary instability stemming from overconcentration.

Economic liberty is indeed under attack, as you state in your editorial. But the attack comes from within the system and has been ongoing for years now. You are mistaken to consider that the discourse of the last several weeks is where the attacks are to be heard. Even after several centuries of recognizing this tendency in capitalism, there has yet to be a cogent institutional framework that effectively deals with it.

What needs to be recognized is that large, national governments don’t work. Indeed, national governments often accelerate the concentrative tendencies that cripple free markets. Government must indeed be of a size that they truly, operationally can be ‘of the people, by the people, for the people.’

True stability in a worldwide market culture will only come when cities and regions, with indigenous businesses owned by local citizens, are the locus of global political-economic power. In this picture, free enterprise and civic engagement naturally dovetail. Self determination by all people is maximized, and done so in the context of free enterprise and economic liberty. That horrid line between government and market that you speak of in your piece, thus becomes much more humanized, liberal and democratic. It is when you have people on other sides of the planet making decisions that impact your and your neighbors’ livelihoods, that there will never be an economic liberty nor reliable prosperity for all.